Question

Suppose the cross-price elasticity of demand between goods X and Y is -5. How much would the price of good Y have to change in order to change the consumption of good X by 50 percent

Answer 1

Answer:

-2.5%

Explanation:

The computation is given below:

We know that

Cross price elasticity of demand = Percentage change in the price of y ÷ percentage change in the price of x

And, the same is given i.e. -5

So here the percentage of change in the price of y is

= -5 × 50%

= -2.5%